Charging Exempt employee's vacation

I have reviewed the posts here and think I know the answer, BUT, and at the risk of beating a dead horse, could you help me here?.. Yes or No answers will be fine. . Here are the facts
-We are a municipality
-An exempt employee (engineer) works an 'extra' 3 hours one night at a community forum
-Next day he tell his supervisor he is leaving 4 hours early..3 hours make up from the night before, and the 4th, he would make up later
-Supervisor tells him MUST use 1 hour of vacation time to cover the 4th hour and makes him enter same on timesheet

After reading and re reading this forum, particularly dwf from 4-4-02 I say this is a wage an hour violation, we can not deduct in increments of less than 1/2day. .not too mention my confusion eover why exempt employers are "counting" hours. am I right or wrong. thanks in advance.

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